UPDATE 2-African Bank prices share issue at big discount
* Rights issue priced at 38.7 pct discount
* Headline earnings contract 88 pct in 11-months
* Credit impairments up 87 pct (Adds analyst comment)
JOHANNESBURG, Nov 1 (Reuters) - South Africa's African Bank Investments on Friday offered its shareholders a hefty 38.7 percent discount to take part in a 5.5 billion rand ($550 million) share issue to repair its balance sheet under pressure from rising bad loans.
Abil, as the bank is more commonly known, is facing a surge in bad debts from its low-income customer base which is struggling to keep up with payments in a weak economy.
South Africans are battling to stay afloat in a country where household debt accounts for 75 percent of disposable income. One in every four people in South Africa is unemployed.
Abil also said on Friday its 11-month headline earnings fell 88 percent while credit impairments widened 87 percent to 8.27 billion rand.
The bank has just issued its second profit warning in five weeks, flagging a 90 percent plunge in full-year earnings due in part to the rising bad debts.
As a result, Abil is attempting to shore up its balance sheet with the capital raising aimed at existing shareholders. It is issuing 685.3 million new ordinary shares at 800 cents a share, a 38.72 percent discount to the "theoretical ex-rights price" of 1,305 cents on October 30.
Abil is offering 84 new shares for each 100 shares held. The bank already has nearly 816 million shares in issue.
"It is a higher discount than expected and means existing shareholders will be effectively forced to follow their rights to avoid dilution," said Harry Botha, an equity analyst at Avior Research.
Abil said the International Finance Corporation had committed to underwrite 75 million of the new shares. Goldman Sachs is underwriting the entire issue.
It also said interest income jumped nearly 24 percent to 10.98 billion rand in the 11 months to end August. Its furniture retail unit, which Abil is trying to sell, made a loss of 226 million rand.
Its shares were up 1.4 percent at 17.25 rand at 1140 GMT, after dropping more than 8 percent in earlier trade. The stock has lost nearly half its value this year. ($1 = 10.0055 South African rand) (Reporting by Helen Nyambura-Mwaura. Editing by Jane Merriman)
- White House reverses, says Obama met uncle and lived with him during law school
- Flights delayed as air pollution hits record in Shanghai
- South Africa mourns Mandela, will bury him on December 15 |
- RPT-UPDATE 1-Ford leans on global Mustang to burnish overseas image
- Analysis: Boeing bidders dangle goodies to win 777X jetliner